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Round table session summary, IAC – International Airport Congress

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  • Adria Canals-Macia – Mott MacDonald- Head of Airport Concession 
  • Lee Lawrence – Tarabot Investment & Development – Chief Investment Officer 
  • Michael Martin – daa International – Senior Vice President Technical 
  • Dr Fethi Chebil – Airport PPP Expert 
  • Moderated by Alan MacGuire from AERTEC Solutions 


Panel questions: 


What are, in your opinion, the greatest challenges that large P3 initiatives face nowadays (both for the public and private sectors)?

Adria Canals: Comments on the importance of the alignment of all the different stakeholders involved in an airport project. The biggest challenge is in defining a business case that works and is clear. It must take into account what the investors want, what the government wants and what all of the stakeholders need. 

Dr Fethi Chebil: Comments on the huge differences between the public and private sectors and the differences between their objectives and perspectives with regards to a project. The public sector tends to focus more on expectations as opposed to actual statistics. These expectations are sometimes unrealistic in terms of real traffic figures. 

The private sector, on the other hand, is always focused on the risk and the reward. In other words, how much will it cost the investors, what the risks are, and how large the return will be. PPP projects are very complex and the biggest challenge is finding a balance between these two very different sectors in all aspects of the project, including the legal framework. 

Lee Lawrence: Points out another question which has not been raised, which is “where is the money coming from?” Investment firms have a lot of choice in terms of infrastructure projects, so why choose airports? The biggest challenge for investors is putting together a business case suitable to present to banks. There is a debt and an equity element to every project, however it seems as if sometimes government agencies forget about the debt element. They must understand that the risk of a project cannot fall entirely on the investors. Banks in some regions also have liquidity issues, which is something that is not always taken into account. 

Michael Martin: In agreement with comments already made, the biggest challenge is to find common ground in the interests of both the public and private stakeholders.


Given the main challenges and risks, what are in your opinion the key drivers and triggers (2-3 max.) that should be observed in order to maximize the chance of a successful P3 initiative?

Lee Lawrence: It’s all about making sure the project is a win-win. The aim is to not only build an infrastructure that will support a nation and its economic development, but also to provide a gateway to give passengers a good experience. There are many stakeholders involved and the key is being able to understand how they are going to interact with one another. We must remember that passengers have a choice, therefore when developing airports we must make sure there is a risk and reward ratio where we can understand the airlines, while also trying to move the reliance on aeronautical revenues towards other income sources. We must be creative in doing this, making sure passengers enjoy the experience and are willing to spend money. 

Adria Canals: The government must allow sufficient flexibility in its regulatory framework for the airport to be able to develop correctly. There must be a mechanism in the contract that allows the project to move forward in a reasonable way for both parties. For example in a less profitable airport there must be a method in place to help the concessionaire build traffic in the early stages. 


What are the regions or markets leading the way in terms of successful delivery of P3 projects? Can they all be taken as examples of an optimum environment for the development of P3 projects or are there any caveats?

Lee Lawrence: Saudi Arabia has a very extensive privatisation programme underway. One of the very encouraging things about this programme is the fact that they are looking elsewhere to find best practices. I was CEO of Airport International Group in Jordan and was involved in the whole privatisation process, from year one to year ten. The interaction with the government and their flexibility during problematic moments of the project was very positive. They understood that we were aiming to build an asset on behalf of national interests, and without this the project would not have been as successful as it has been. The Middle East clearly has some way to go, it’s not all about 100M PAX per year terminals, but there are now some areas of the Middle East that are very reliant on P3, not just aviation. 

Michael Martin: Saudi Arabia has seen some very successful cases as the focus has been flexible and been on achieving the goal of the project, rather than on the process itself. This is why we have seen some failures in other regions such as the USA, as the process became more important than the goal, and if this happens then the project will fail. 

Adria Canals: In Europe we are seeing more transactions related to mature airports or brownfield airports. This is a different type of transaction. These are becoming more transactions of business instead of infrastructure. 


What are the regions and markets where you see the biggest opportunities for the development of P3 projects in the future and why?

Dr Fethi Chebil: The US market would be a good market for people looking for a safe investment. The KSA is also a very good market at the moment.

Adria Canals: We are seeing a lot of developments in Asia and Southeast Asia. Japan had a very successful first round, attracting international operators, and is now preparing for the second round. They seem to know what they want. The challenge here is that in many of these place the legal framework is still not sufficiently up to speed to be able to facilitate the PPP process. 

Lee Lawrence: One area that has caught my eye recently in particular is Indonesia in Southeast Asia. It is on the cusp of recognising that P3 is the only way they can go. Interestingly enough it was an airline that sparked my interest in Indonesia rather than the government. Air Asia began to take on the role of investor by looking at expanding the airport infrastructure itself to satisfy its increasing passenger demand. The company came to the conclusion that waiting for the government would take too long. There could be future opportunity there for consultants. 


Audience questions: 


Carlos Berenguer from AERTEC Solutions raises the question of why Brazil hasn’t been mentioned as a region with opportunities in the pipeline. 

Michael Martin: Dublin Airport was studying the previous generation of privatisations in Brazil. The process seemed to simply be an auction. In other words, the highest bidder gets the contract. There was no prequalification process, so anybody could take part. Things seemed to improve slightly for the second round of transactions, but it still wasn’t for us. Comments on a particular political issue between Ireland and Brazil related to Olympics ticket sales, therefore taking part in the process would have been difficult. 

Dr Fethi: The bidding process itself seemed to kill the market. 

Adria Canals: They seemed to have learnt from the first round, as in the second round they required expertise and management skills, not just the cash that seemed to be necessary for the first round. The latest transactions have seen top flight operators such as Fraport, Zurich and Vinci enter. It is good that they have changed the rules. 


Ghazi Al-Oufi from the Royal Commission for Jubail and Yanbu asks about their views on the non-financial risks in a PPP transaction for both the public and private parties. 

Dr Fethi: Outlines that in his opinion the biggest non-financial risks in a PPP project come from the changes to rules and regulations put in place by the government and whether they are adapted and changed enough to help the project. 


Alejandro Martín from AERTEC Solutions questions whether the environmental and sustainability issues associated with airports are given sufficient importance in P3 transactions.

Lee Lawrence: Affirms that environmental practices are absolutely mandatory. A good example is London Heathrow’s fourth runway. One of the most technically advanced nations on the planet has taken over 40 years to make a decision about the new runway.

Michael Martin: It is absolutely necessary to have all environmental issues resolved before a project can go to market. 

Adria Canals: Sustainability has now become the most holistic word in this sense. It covers all the social and environmental aspects. It is important for both large airports and also smaller airports in countries where they don’t necessarily have the funds, such as Madagascar for example. The IFC and the multilateral banks get involved in situations where the correct development of the airport is key for the region’s economic growth. This is, for example, where the tourism industry is the main element that maintains economic development is such small countries. These types of banks that fund these projects have very strict environmental methodologies that you have to follow. Sometimes as part of the environmental study a social analysis is also required. In developing countries in fact, some of these elements are becoming more important than things such as the length of the runway. Going back to Heathrow, in the end it is all going to come down to the air quality study. If the result is negative then the project may never go ahead. 



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